NFIB

Don't Wait Until Completion to Bill for Long Projects
12/ 03/ 2002

by Jeffrey Moses

The worst thing a small company can do is go into a lengthy project without an understanding of when billing can be made. Complete financial terms -- including payment schedules -- should be included in purchase orders, formal bids or other types of agreements that are concluded before starting a project.

Fortunately, customers know that they will have to write a check for services rendered. It's up to you to work out when the checks will be written. Waiting until the end of a project to bill can put a strain on the financial resources of a small business. (Ongoing costs can include not only materials used, but also salaries for workers.) Also, waiting until the end of a project to bill puts a small company at risk. If the customer delays payment or refuses to pay, the entire projected payment may be lost.

For these reasons, payment schedules should be worked out and agreed upon during the pre-work stages of a project. These schedules should include:

1. Specified times at which billing will take place. These stages may be based on duration (bi-weekly, monthly, etc.) or on benchmark stages of the project.

2. When payment will be made (upon receipt of invoice, 10 days after, 30 days after, etc.). During an ongoing project that involves payment of salaries, payment is often due upon receipt of invoice. Realistically, this means within 3-4 business days.

3. Who will pay for what? Payment schedules should specify who will pay for materials, travel and any extras.

4. Overtime rates.

5. Financial penalties for not meeting deadlines.

6. Methods for determining work approval at various stages.

In addition to safeguarding finances, billing in stages allows you to keep in close contact with your customer. This enables you to continually monitor the customer's attitude, and to make sure that all work is meeting expected standards.

Keeping in ongoing contact with customers in this way also assures that they are kept informed of all developments in the project, and gives them the chance to approve or disapprove of all work done. This, in effect, lets you maintain control of a project. When you continually receive written or even verbal approval of work done, a customer can never honestly say that they don't like what you've done up to a certain point.

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